Daily update
Daily update
- The Federal Reserve did nothing on rates. Investors have desperately sought additional guidance on policy, putting the fabled dot plots in focus. These black smudges on a piece of paper are really not that helpful. More Fed members think that there will be two cuts this year than anything else. Given the disinflation forces in the economy, several of those who suggested one cut likely give a high probability to two cuts.
- US consumer price inflation emphasized disinflation forces. Almost every sector of the US economy is in deflation somewhere in the US. Market determined prices continue to weaken, and durable goods are sinking deeper into deflation. Today’s producer price inflation is less distorted by fantasy prices, and is expected to signal moderate pricing.
- Europe has a quiet calendar–German May wholesale prices are due, having been in deflation for over a year. The flood of ECB speakers seeking to clarify ECB President Lagarde’s comments seems to have slowed.
- The EU did impose more taxes on its consumers than had been expected, in announcing tariffs on electric vehicles from China. Not all EU consumers are taxed equally–taxes vary according to the brand consumed. This represents more economic nationalism, but is perhaps unlikely to spark a major trade war.
